“With the UK Cabinet and Parliament yet to agree to the plans, we are clearly not out of the woods yet,” said Capital Economics economist Ruth Gregory.

She said she would not be surprised if a deal wasn’t secured until “well into” next year, with the pound likely to “pull back” again by the end of the year.

Pound surges against the dollar

Neil Mellor, currency strategist at BNY Mellon, was also wary, warning Prime Minister Theresa May still had to convince party members as well as the Northern Irish Democratic Unionist Party (DUP), which props up her minority government.

“Ms May’s proposals are tasked with healing an increasingly divided Conservative party while also keeping the party’s DUP allies onside,” he said.